An announcement this week from the Food and Drug Administration outlined a proposal to ban partially hydrogenated oils, citing health risks because of the presence of trans fats.
Ironically, partially hydrogenated oils were once celebrated as a healthier alternative to lard and butter, and were commonplace in deep fryers, margarine and processed foods.
During the last decade, research on heart disease and subsequent public outcry has resulted in around 80 percent of the food industry moving away from trans fats already. The FDA ban, expected to be implemented in 2015, would finish that transition.
This could affect commodities markets, especially soybean oil, which is a dominant source of artificially produced trans fats.
More than 15 percent of domestic soybean oil is used to make partially hydrogenated oils, and Thursday’s announcement caused a sharp selloff in Chicago’s soybean oil market. By the end of the week, soybean oil had lost more than 1.5 cents per pound, trading Friday at 40.07.
Europe cuts interest rates
Though the recession in Europe has officially ended, the continent’s economies are still struggling with low economic growth. One sign of this are near-stagnant prices, which can cripple consumer spending and investment as people wait for lower prices in the future instead of buying today.
To combat this phenomenon, known as deflation, the European Central Bank announced Thursday that it was cutting interest rates to 0.25 percent, the lowest level in ECB history.
This move, intended to stimulate the economy by lowering borrowing costs, hurt investor confidence in Europe, sending European stocks and the Eurocurrency lower. In the aftermath of the decision, the euro fell near a two-month low, trading Friday near $1.33.
Meanwhile, the U.S. economy continues growing, gaining more than 200,000 new jobs during October. Other economic indicators such as personal income and factory orders are showing signs of strength, which has prompted some economists to call for the U.S. to ease back from its unprecedented stimulus program.
For now, the United States, the European Union and Japan have interest rates near 0 percent, making it inexpensive to borrow and giving little incentive to save.
USDA boosts corn
The USDA released its monthly Crop Production and Supply & Demand reports at midday Friday, the first since the government shutdown.
The report cut expected corn acreage to a total of 87.2 million acres, while projecting increased demand for the grain. This helped rally corn off three-year lows, trading midday near $4.25 per bushel.
Walt Breitinger is a commodity futures broker in Valparaiso. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.